Background
SWM Motors, a well-established motoring services business based in Brandon, ceased trading on 14 May 2020 following an irreversible downturn during the COVID-19 pandemic. With nearly a decade of successful trading, the company had built a strong reputation locally, offering diagnostics, repairs and vehicle servicing from its garage premises and employing several full-time staff.
Like many in the motor trade sector, the business was significantly affected by lockdown restrictions and social distancing measures, which disrupted day-to-day operations and led to sustained periods of closure. Fixed overheads, including rent and equipment finance, continued to accrue and placed additional strain on cash flow.
The most damaging impact came from the government’s six-month extension for MOT testing which caused an immediate 40 per cent drop in revenue. Despite efforts to adapt, the company had accumulated £129,723 in liabilities, including £70,731 owed to trade creditors, more than £27,000 in hire purchase commitments, and £15,515 in loans and overdrafts. Although assets were identified, including £77,260 in debtor payments, over £14,000 in stock, and £3,277 in cash, these fell short and left a deficit of £34,851.
Recognising that the financial position was no longer sustainable, the directors made the difficult decision to cease trading and turned to McTear Williams & Wood for professional guidance on the next steps.
The Challenge
The business had been operating at a loss for some time and was no longer viable without significant restructuring or investment, which was not forthcoming.
The directors’ key concerns were:
- Ensuring all employees received their statutory entitlements
- Handling the closure with transparency and minimal disruption to creditors and customers
- Managing reputational damage in a small, close-knit community
Additionally, there was pressure to act swiftly to secure business assets and prevent any deterioration in value.
Our Approach
McTear Williams & Wood was appointed to assist the directors with a Creditors’ Voluntary Liquidation, which was completed by Andrew McTear. As part of our approach, we:
- Held a detailed consultation to explain the CVL process and the directors’ duties
- Advised on communication with employees and creditors
- Arranged for the valuation and disposal of the company’s equipment and stock
- Handled all statutory requirements, including creditor meetings and filings with Companies
- House and the Insolvency Service
- Supported employees in accessing redundancy payments via the Redundancy Payments Service
Our team ensured the directors were kept informed throughout and reassured all stakeholders that the matter would be resolved with professionalism and care.
The Outcome
The company was formally placed into liquidation in early 2024. All employees were made redundant and received guidance to claim their statutory entitlements. Business assets were sold, and the proceeds were used to fund the liquidation process and pay dividends to to creditors.
Although the directors had made efforts to recover following COVID-19, the long-term economic impact proved too severe for a business of this size. By taking early action and engaging with licensed insolvency professionals, they were able to close the business in an orderly manner and fulfil their legal responsibilities.
Supporting Directors Through Post-COVID Recovery
At McTear Williams & Wood, we continue to support family and small businesses.
Our goal is to help directors make informed, responsible decisions, whether that means restructuring to survive or winding up with integrity.
If your business is struggling, contact us for a confidential, no-obligation consultation.